AUM based Wells Fargo advisor making lots of small stock trades in IRA, why?

First, they make money on the trades... that is how we have these big trading houses... it is not a direct deduction from your account but shaving a bit on the prices selling or adding a bit when buying...

Second... if they have these 'portfolios'... then make a MF out of it and do all the trading in that MF... there should not be 80 small trades to rebalance a portfolio...

I agree that 7% is not that great... I just checked my Schwab account and my worst account is 11%... all accounts are about 15%...

She needs to get out of that account and stop paying money to someone who does not know what they are doing...
 
First, they make money on the trades... that is how we have these big trading houses... it is not a direct deduction from your account but shaving a bit on the prices selling or adding a bit when buying...
Ah, that makes sense now. Such BS. She's stubborn and slowly losing it so the only hope is once I can show her the small RMD I would manage does better she'd just move the whole thing over. I would love to see that.
 
The point was to get the OP an estimate in dollars of how much this FA "friend" was costing his mother. The "already obvious conclusion" is presently not at all obvious to his mother.
I think she feels like she owes this FA something because in the early 90s she said he got a 8% (or something) zero coupon bond that put me through college or something like that. I don't know the details but I don't at all believe that he got such a great deal back then either.
 
The way to detect this is to calculate the total return of the equity portion of the account. This is kind of a pain; the easiest route is to separate the fixed income and the equity holdings into separate accounts and let the brokerage house computer calculate the return. Then compare to total return (not price return!) of some comparable indexes.
Interesting, her Roth IRA portion is all equities (stocks, and mutual funds) and she has a 1 year 17% return, which after subtracting fees etc is quite a bit worse than the sp500 26% growth.
 
I completely agree with those who suggest your mom could do a lot better (several ways, but mostly just index funds at Vanguard or Fido or Schwab.) However, unless she is under financial distress, you might actually be kinder letting her have her FA waste some of her money but make her happy. Kinda sad, but sometimes it's not only easier but kinder to just be supportive. It's only money and it's her money and she's the only mom you get. Just another perspective so YMMV.
 
Interesting, her Roth IRA portion is all equities (stocks, and mutual funds) and she has a 1 year 17% return, which after subtracting fees etc is quite a bit worse than the sp500 26% growth.
Wow - if those mutual funds really are 100% equities (not a balanced fund), then that performance is awful. I wonder, I think it would be hard to do that bad? Just like picking winners is hard, picking losers is just as tough.
 
I would push to have a conference call with the FA, ask some tough questions so the FA knows that Mom has someone monitoring activity in the account. Why does FA have authority to make trades without approval?
 
I would push to have a conference call with the FA, ask some tough questions so the FA knows that Mom has someone monitoring activity in the account. Why does FA have authority to make trades without approval?

I thought that was implied by AUM - you pay them a fee and let them manage your money for you.
 
I thought that was implied by AUM - you pay them a fee and let them manage your money for you.
Yes. And the FA knows exactly what he is doing: nothing. The trading is initiated elsewhere in Wells. Nothing wrong with having a meeting (face-to-face, not conference call) but it is unlikely to change anything.

If the OP can pin the FA down on poor performance in front of mom, that may be a benefit to at least get her thinking about how much this guy is really costing her.
 
I thought that was implied by AUM - you pay them a fee and let them manage your money for you.
Really? I always thought AUM fee arrangement is different from unfettered trading authority. The main point of my post was to let the FA know the client has family backup. This applies to every relationship our elderly relatives have including healthcare providers, contractors, etc.
 
The FA is just a forward facing sales rep, while many do have CFP certifications. They don't decide on the trades for AUM.
 
I didn't notice if this was mentioned, but is the 7% return in line with the OP's mother's risk tolerance? I've seen everyone talking about the S&P and other higher rates of return, but no discussion of risk tolerance.

If it were me, I'd like an explanation as to why the volume of trades and how those holdings were targeted. Is he harvesting losses?
 
It's called Manufactured Complexity meant to confuse and discourage your mother from taking charge of her own investments. Rest assured there are fees for all these trades buried deep within her account. Please, please help her unwind this and get the heck out to a low-cost provider (Vanguard, Fidelity, Schwab, etc.). She can do better with less risk and fees. Contact one of the providers and let them do all the work all for free!!
 
She's stubborn but I'm working on it. For anyone interested, I attached a .txt with the trades made from a couple of weeks ago. (There were no additional trades made all year). Some highlights:

09/12/2024,TRAD IRA,Buy,34,UNH,"-$19,924.51"
09/13/2024,TRAD IRA,Sell,-32,UNH,"$19,051.15"

09/16/2024,TRAD IRA,Buy,3,AAPL,-$649.05
09/12/2024,ROTH IRA,Sell,-1,AAPL,$221.82
09/13/2024,ROTH IRA,Sell,-1,AAPL,$223.50
09/12/2024,TRAD IRA,Sell,-6,AAPL,"$1,330.46"

I really don't understand why he waited until now to do these trades, and why he's buying and selling at the same time, all in ira/roth ira accounts.
 

Attachments

  • sept-trades.txt
    8 KB · Views: 23
She's stubborn but I'm working on it. For anyone interested, I attached a .txt with the trades made from a couple of weeks ago. (There were no additional trades made all year). Some highlights:

09/12/2024,TRAD IRA,Buy,34,UNH,"-$19,924.51"
09/13/2024,TRAD IRA,Sell,-32,UNH,"$19,051.15"

09/16/2024,TRAD IRA,Buy,3,AAPL,-$649.05
09/12/2024,ROTH IRA,Sell,-1,AAPL,$221.82
09/13/2024,ROTH IRA,Sell,-1,AAPL,$223.50
09/12/2024,TRAD IRA,Sell,-6,AAPL,"$1,330.46"

I really don't understand why he waited until now to do these trades, and why he's buying and selling at the same time, all in ira/roth ira accounts.
Churning!!! The UNH trade cost her over $800. Point that at to her
 
Churning!!! The UNH trade cost her over $800. Point that at to her
Look closer. The buy was 34 shares, the sell was 32 shares. It went from ~$586 to ~ $595 for a gain on those 32 shares sold. About 1.5% in one day?

But that's a LOT of short term trading, tough to justify.

So maybe they have an algorithm, a quick rise and they sell? But I doubt it beats the market in the long term, sooo....
 
Feels like day trading, scary business.
Agreed, trading in and out of the same stock in the same account within a couple days. This is gambling, not investing. I don't know if there's a core holding of bonds that aren't being sold, but all these are stocks, so the 7% returns on the year when the S&P is up 20% demonstrates that this ain't working for anyone but the advisor.
 
I’d report that activity to the WF and ask why the CFA is day trading with her account. Threaten to sue unless these unauthorized trade are undone.
 
Not really day trading unless it is happening all the time... the OP said it was during a short timeframe and nothing the rest of the year...

Still does not make sense, but let us not call it something it is not...
 
I’d report that activity to the WF and ask why the CFA is day trading with her account. Threaten to sue unless these unauthorized trade are undone.

As I think I mentioned earlier, I'm pretty sure that the AUM arrangement authorizes the advisor to trade the account at their discretion.

They also probably only need to be "suitable" for the client and not necessarily "the best". The suitability standard is a pretty low bar.
 
Why would anyone buy 9/12 and sell 9/13. Sounds like day trading to me. I’ve never sold a stock in my life without holding it for at least 1 year.
 
Not really day trading unless it is happening all the time... the OP said it was during a short timeframe and nothing the rest of the year...

Still does not make sense, but let us not call it something it is not...
Right, these are the only trades all year, and happened right after he took her out to lunch. I'd like to know what he got out of this though, that would make things much clearer. I don't see any extra charges associated with these trades, and they're pretty small trades. Why on earth would he sell 1 share of AAPL 2 days in a row? Maybe it's automated, but then why start now?
 
You are going to have to ask him to know for sure what's going on. There is no obvious answer, so nobody here can tell you what he's thinking. Have your Mom set up a meeting for the three of you. The advisor should be willing to explain it to both of you with her permission.

I can tell you that my WF account, which is a taxable account rather than an IRA, doesn't have any similar activity in this timeframe. Or ever. I don't see a rapid buy/sell of the same stock at any time in the past 12 years, but I do have some occasions where a small number of shares were sold from several holdings and those proceeds were combined to purchase something else.
 
I had a FA for years while I was w*rking. He had my account in front end loaded mutual funds. 5% load.

When I FIRED and stopped contributing, first thing he did was switch me to AUM at 1.5% annual fee in a sleeve of about 80 or 90 individual stocks. So I paid him 5% up front to invest my money and once I stopped contributing he got another 1.5% each year. He told me the sleeve would beat the SP 500 by 2 or 3 % every year. Well I watched it underperform the SP 500 by 2 or 3 % a year for a few years and switched it to Vanguard and put it all in their Total Stock fund and have had much better results.



Folks, its really that easy.
I suspect for some people there’s a status claim to talk about having “a guy” that handles their money. I had a very slick and slimy engineering manager early in my career that did exactly this.

My old college roommate is an independent FA with his own firm that he built up with a mutual college friend. He’s done well and collects a fixed fee for AUM. But the services he’s providing are nothing special, his clients simply believe it’s complicated.
 
Back
Top Bottom